The credit comes from the Province of Alberta’s Agri-Processing Investment Tax Credit, which offers a 12 per cent non-refundable tax credit when corporations invest $10 million or more in a project to build or expand a value-added agri-processing facility in the province.

RJ Sigurdson, provincial minister of agriculture and irrigation, described the facility — claimed to be the largest of its kind in Canada — as good news for provincial canola producers and a boost for the Province’s greenhouse gas reduction efforts.

“When the facility is fully operational it will transform canola and other seed oils into renewable diesel that is lower in emissions than conventional fuels. To make this happen, Imperial will be sourcing most of its feedstock from canola producers right here in the province,” he said.

“We are pleased to know that Imperial will be sourcing low carbon hydrogen for its operations from Air Products in Edmonton. Using low carbon hydrogen to produce the lower emissions renewable diesel will help cut greenhouse gases.”

Chris Vervaet, executive director of the Canadian Oilseed Processors Association, called the announcement “a shining example of continued collaboration that will help support growth in Alberta’s two key economic sectors: energy and agriculture.”

“Local production of renewable fuels derived from locally grown canola provides an important market diversification opportunity right here in our own backyard that will benefit farmers, processors and the entire value chain in the province of Alberta.

“To put a finer point on this opportunity, this facility represents demand for canola seed that could be as large as two-and-a-half million metric tonnes per year. That’s the size of some of our largest export markets today.

“Simply put, a project of this magnitude is a game changer for our industry and a win-win for all parties involved.”

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“The capacity of crush could grow from 11.3 million metric tonnes today to 18 million metric tonnes in three or four years,” said Chris Vervaet, executive director of the Canadian Oilseed Processors Association (COPA).

Vervaet was among the speakers at this year’s CropConnect conference in Winnipeg Feb. 14. His talk focused on the impact of renewable fuels on the canola value chain.

“This is unprecedented,” said Vervaet. “I’ve talked to folks who have been around oilseed processing for the better part of 30 or 40 years; they’ve never seen this kind of growth.”

Roughly 2.5 million tonnes of canola seed equivalent stocks are currently used for biofuel markets in Canada, the U.S. and the EU. Vervaet said it could grow to 5 million by 2026 and could reach as high as 8 million by 2030.

“We’re taking a stab in the dark here a bit, but we feel pretty optimistic about the role of biofuels in seed demand going forward,” he said.

To meet that demand, seven new Canadian facilities have been announced over the last three years to bolster renewable diesel production capacity.

“If it all gets built the way that it’s been described in their press releases, that could be 4 billion litres of capacity over the next four or five years,” said Vervaet.

South of the U.S.-Canada border, another 25 facilities are either operating, under construction or being planned. “If that all comes to fruition in a couple of years time, that’s close to 30 billion litres of production capacity,” said Vervaet. “This is a tremendous opportunity to see more value-added processing occur in Canada.”

–Further coverage to come. 

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“For canola crush, in terms of possible capacity growth in the years to come, we could see almost six million tonnes of increased capacity based on facilities that are either under construction today or have been announced,” Chris Vervaet, the association’s executive director, told attendees at Canola Week here.

“That’s significant growth from the current capacity – a 50 per cent increase, in fact.”

While Canadian production of renewable diesel is low now, it should reach one billion litres by 2024, two billion the year after, and almost 4.5 billion by 2027, Vervaet said during an online presentation.

There are a number of projects poised to come on stream, he said.

Parkland Corporation is expanding its renewable diesel production at its refinery in Burnaby, B.C.; Imperial Oil is proceeding with a renewable diesel complex at its refinery near Edmonton that will produce more than one billion litres annually; Federated Co-operatives Ltd. says its similar-sized facility at Regina will be in operation by 2027; Tidewater Renewables is building a facility in Prince George, B.C. able to produce 150,000 litres annually; and a Saskatchewan company called Covenant Energy announced last year that it plans to build a 300-million-litre facility in that province.

Production capacity is growing even faster south of the border, and so is demand for renewable diesel. Unlike biodiesel, it is chemically identical to fossil diesel and can be used in its place, even in cold weather.

Depending on the feedstock and production method, renewable diesel can reduce greenhouse gas emissions by 80 per cent or more, and that’s leading governments to push the green fuel, said Vervaet.

“There are a lot of biofuel policies that are driving demand over the next decade or so,” he said, adding that has already led to a production boom in the United States.

“Two years ago, there was 2.5 billion litres of production capacity. This year, that’s already roughly tripled. We see it now at 7.6 billion litres.”

Feedstocks can be vegetable oils (including soyoil and used cooking oils) and animal fats, but Vervaet predicted there will be a major expansion of canola production in North America, possibly by 50 per cent or more. Some of that could come from expanding into the brown soil zones of Canada and growing winter varieties in the U.S., he said.

“We have a lot of opportunities for productivity gains and acreage expansion. We have a high degree of optimism that we will see canola production grow in North America. Renewable fuels and the demand for renewable fuels is going to grow as well.

“We think there’s a lot of room to grow production and it will keep pace for the canola used in biofuels and the rest of canola will be used in the traditional markets such as food and feed.”

Producers haven’t seen the impact yet but they will, said Charles Fossay, president of the Manitoba Canola Growers Association.

“It’s probably three years away before we will see the full effect of renewable diesel and biodiesel as these fuel standards kick in,” said the grain farmer from Starbuck, southwest of Winnipeg. “As these new crush plants come online and they start using canola oil to be part of the refining process to produce diesel fuel, it’s another market for producers.

“In the long run, it will maintain good canola prices and add a bit more to the prices that farmers receive from the crops they grow.”

Alberta producer John Mayko echoed those comments.

“Definitely, I think it’s a good news story,” said the grain farmer from near Mundare. “I’m not sure how much extra demand will be from the biodiesel side of it. I guess it will depend on what the market forces us to do, whether the processors decide to put the canola oil into renewable diesel or biodiesel. Either of them is good news for us.”

Renewable diesel will also create more stable demand for canola, since producers will be able to sell to the North American market rather than relying on overseas buyers such as China, said Mayko.

Renewable diesel will also enhance the green credentials of farmers, said Fossay.

“I think it’s also showing how agriculture is helping to deal with climate change by reducing nitrous oxide and carbon dioxide emissions,” he said. “It’s just one of the many ways that agriculture is helping deal with those issues.”

And the push to lower greenhouse gas emissions isn’t going to let up, Vervaet said during his presentation.

“Renewable fuels are a proven and viable solution to decarbonize transportation fuels.”

“Transportation fuels in Canada, the United States and globally account for a quarter of all greenhouse gas emissions. It’s a very significant footprint in terms of emissions from transport fuels.

“Renewable fuels are part of that solution, especially renewable fuels from crops like canola, because they have a lower carbon footprint.”

A key hurdle was passed this summer when the federal government released details on its Clean Fuel Regulations. The canola sector had been concerned about the methodology that Ottawa would use to calculate how green a fuel source is, as well as the possibility that canola would require audits or certification. But those fears were largely allayed because the regulations acknowledge farmers’ stewardship efforts such as no-till and minimal till, which contribute to canola’s lower carbon footprint.

When the new clean fuel standard starts coming into effect next summer, the push for greener fuels will intensify, Vervaet said.

“This is a regulation that will mandate lower carbon intensity for the fossil fuels sold and used in Canada,” he said. “The federal Clean Fuel Regulations mandate a 15 per cent lower carbon intensity by 2030.”

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“The global outlook for Canadian canola oil is promising, and this latest investment emphasizes our ongoing commitment to best-in-class facilities,” said Darrell Sobkow, the company’s senior vice-president for processing, food and ingredients.

Richardson said the round of “upgrades and improvements” at its Yorkton facility will double its processing capacity and allow it to process over 2.2 million tonnes of canola seed per year. The upgrade would also give the plant a “high-speed shipping system” with three 9,500-foot loop tracks that can serve both major Canadian railways, as well as three high-speed receiving lanes for deliveries by farmers and truckers.

Canadian canola crushers have been operating at a sizzling pace this year. Although the total crush dipped slightly below 800,000 tonnes in February, the prior four months had set records with 900,000 tonnes of seed processed monthly.

The Yorkton processing and oil refining plant “will be dedicated to moving canola crush products at some of the most efficient levels seen in North America,” Richardson said.

Construction at the site, due to be completed in early 2024, won’t disrupt current operations, the company said.

“We opened the original Yorkton plant in 2010 and at that time, it was by far the largest capital investment Richardson had ever undertaken,” said CEO Curt Vossen.

“Saskatchewan and Manitoba producers have responded effectively, providing growth in canola production over the years — this has given us the confidence to move forward with expansion once again.”

Richardson has been aggressively dialling up its Prairie crush in the past decade, including a $30-million expansion at York­ton in 2014. More recently, in 2017, it brought a $120-million expansion online at its Lethbridge canola-processing and oil-packaging plant, bringing that facility’s annual crush to over 700,000 tonnes per year.

The southern Alberta plant, billed by Richardson as one of the first in the world to market canola oil, was previously expanded in 2015, which in turn followed a $15-million expansion on its bottling and packaging facility in 2012.

The Yorkton expansion is good for the entire canola sector, said the plant’s director of operations.

“This state-of-the-art facility represents a good news story for all industry participants — for our producer customers and end-use buyers across North America and abroad,” said Keith Belitski.

There are 14 crush facilities in Canada. The 11 in Western Canada process canola while three in the East handle both canola and soybeans.

“Over the last decade, approximately $2 billion have been invested in plant construction; crush capacity has more than doubled, reaching a new high of 11.0 million tonnes for canola and 3.2 million tonnes for soybeans in 2020,” says the website of the Canadian Oilseed Processors Association, which represents the six companies that own the crushing plants.

In the decade leading up to 2020, the canola crush grew by 56 per cent to 10.3 million tonnes annually, according to the association.

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According to several reliable sources, Viterra had planned to leave too, but changed course — possibly because of a big cut in membership fees.

Losing Canada’s two biggest grain companies would’ve been an even bigger blow to the 51-year-old council, which is credited for playing a key role in canola’s success.

Alberta Canola Producers Commission was quick to pledge its support for the council. Along with its sister organizations in Manitoba and Saskatchewan and their national umbrella group, it praised the council both for its marketing and agronomic acumen.

“The science-based support they provide to company agronomists and farmers will keep canola a profitable and sustainable crop on Canadian farms for years to come,” they said in a statement.

While the growers’ groups are the largest source of the council’s funds, Richardson’s withdrawal from the council, and its much smaller flax and soybean sister groups, will hurt.

“We’re looking for a way of getting better value for the dollars that we’re spending in these industry associations,” said Jean-Marc Ruest, the company’s senior vice-president for corporate affairs. “We spend well over a million dollars a year funding these three organizations.”

The decision to leave was not made suddenly or in a fit of anger, said Ruest.

“We had provided notice to the three organizations — well over a year ago — that our funding commitments would end at the end of 2017,” he said.

Creating a single oilseed council was just one issue, he added. His company questioned how much the canola council spends on market development — something his company is prepared to do itself as an exporter — and a funding model where big companies pay more than smaller ones, Ruest said.

There’s also a cost for staff time to participate in organizations, he said, adding Richardson will continue its membership in other industry associations, including Cereals Canada, the Western Grain Elevator Association, and the Canadian Oilseed Processors Association.

Sources say Viterra shared those concerns and worked with Richardson to push for efficiencies, including merging the canola council, Flax Council of Canada and Soy Canada. Viterra eventually opted to stay, but with a lower membership fee, which according to one source, was to be cut to 15 cents a tonne from 23 cents. The reduced membership fee will apply to other members, too, the source said.

The council has 38 employees and in 2016 received almost $8.3 million from its core funders — exporters, crushers, farmers, and life science firms.

In contrast, Cereals Canada co-ordinates the wheat sector with just six employees and a budget of just over $1 million. The two crops are close in acreage, but wheat is a much more diverse crop with many more end uses, classes, and grades than canola, Ruest said.

The canola council is not endangered by Richardson’s withdrawal, said canola council president Jim Everson.

“We have a very solid value chain; a very solid budget and work plan; and we’re very confident about where we’re going,” he said.

The council’s success in uniting the canola industry is a Canadian comparative advantage, he added.

Markets change and vary with the product and country. Canola doesn’t need as much promotion in the U.S. as it does in a newer market such as Vietnam, Everson said in defence of market development. The council’s agronomy efforts help grain company agronomists, he added.

Richardson holds no animosity towards the canola council, Ruest said.

“We’re disappointed we got to this result, but that doesn’t make us hostile to the canola council,” he said. “We support the canola council. We’ll probably have initiatives where we can work with it.”

His company may even “come back to the fold at some point in time,” he added.

“But that’s a decision for them to make,” he said. “We don’t want to drag people along with us who are reluctant or don’t want to participate. That doesn’t help anything either. It’s OK to have disagreement and different viewpoints on what’s important and what’s not.”

— With staff files

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The report detailed how much canola and soybeans were crushed in Canada. The report was issued weekly and followed by different industry professionals across the country.

Ken Ball of PI Financial in Winnipeg was sorry to hear about the loss of the weekly report when contacted Friday.

“I’ll certainly miss them, that’s for sure. We do follow those pretty closely on a weekly basis and in Canada in general we have a dramatically less amount of timely, current, pertinent information compared to what we get on the U.S. markets from the (U.S. Department of Agriculture) and other sources,” he said.

COPA said crushing data will still be available through Statistics Canada’s annual and monthly statistics. COPA will also continue to release updates on a monthly basis.

According to Ball, it was one of the few timely reports to which the Canadian grains industry had access.

“Lots of the other information we do get is weeks or months old by the time we get it and makes it much less useful, so it’s a shame to lose that,” he said.

Domestic usage reports from the Canada Grains Council are released, but Ball said he liked having the weekly reports from COPA to keep a much closer tab on fluctuations in the crush margins.

A notice attached to COPA’s report for the week ended Wednesday stated any questions about the discontinuation could be directed to COPA executive director Chris Vervaet.

COPA’s Winnipeg office, when contacted Friday, said Vervaet was out of office and unable to answer questions until Monday.

— Ashley Robinson writes for Commodity News Service Canada, a Glacier FarmMedia company specializing in grain and commodity market reporting. Follow her at @AshleyMR1993 on Twitter.

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Fund traders started the week sitting on a long position of about 30,000 contracts, and the early selling whittled that down to about 20,000 with some bearish chart signals adding to the declines.

However, concerns over hot and dry weather mounted as the week persisted, and those fundamental issues brought speculators back to the buy side. Heat warnings were in place for much of Alberta and Saskatchewan, which should cut into the yield prospects.

The jury is still out on the size of the yet-to-be-harvested-crop, but with expectations for a rather tight carryout best guesses say the market will need to work to ration about one million to two million tonnes of canola in the 2017/18 crop year.

With only a week left in the 2016/17 marketing year, the domestic crush just passed 9.0 million tonnes in the latest Canadian Oilseed Processors Association (COPA) report. That’s about 700,000 tonnes above the previous year’s total. The Canadian Grain Commission data out during the week placed canola exports-to-date at 10.7 million tonnes, also about 700,000 tonnes above the 2015/16 pace.

As much as concerns over heat stress are underpinning canola, the situation is thought to be even worse south of the border.

A crop tour of US spring wheat growing regions during the week placed average yields at 38 bushels per acre, which would compare with the average of about 46 the previous year. The crop tour didn’t account for the how many acres will be outright abandoned in the drought stricken regions of North Dakota and Montana.

Canadian wheat crops are also dealing with some heat stress, but hard red spring cash bids in the countryside still lost ground as the Canadian dollar rallied sharply.

The currency settled at 80.34 US cents on Friday, July 28, hitting its highest level in 25 months.

Soybeans and corn in the US are also in the midst of the summer weather trade, with the day-to-day forecasts dictating the direction of the market. Forecasts calling for some much needed rain and cooler temperatures were a bit bearish during the week, but both crops remain stuck in rather narrow trading ranges for the time being, with participants showing a reluctance to push values too far one way or the other until they get a better handle on production.

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The canola crush during the week ended Wednesday came in at 200,294 tonnes, according to the most recent Canadian Oilseed Processors Association report.

That puts the crush capacity utilization for the week at 93.7 per cent, and the year-to-date level at 89.4 per cent.

A total of 3.99 million tonnes of canola have been crushed to date, up from 3.48 million at the same point a year ago.

While crush margins have softened slightly over the past month, they are still well above the year-ago levels.

Processor margins were estimated Thursday at $116 per tonne above the nearby futures, compared to just $73 at the same point a year ago, according to ICE Futures Canada data.

— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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Capacity utilization during the week ended Wednesday climbed to 82.8 per cent, which compares with only 66.9 per cent the previous week, according to the latest report from the Canadian Oilseed Processors Association.

A total of 165,368 tonnes were crushed, more than 30,000 tonnes above the previous week.

Domestic crush margins, currently at about $44 above the nearby November futures, are at about half the level they were at the same point in 2014, according to ICE Futures Canada data.

However, the reduced profitability has not yet led to a reduction in processing.

The total canola crush during the 2015-16 crop year to date comes in at 1.187 million tonnes, which is right in line with the 1.19 million tonnes crushed during the first two months of the 2014-15 crop year.

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Crush margins provide an indication of the profitability of the product values relative to the seed cost when processing canola, with exchange rates also factoring into the equation. As of Monday, the canola board crush margin, calculated by ICE, was at about $96 above the most active May contract.

The margins took a $6 hit on Monday, due to a combination of rising Canadian futures, a drop in CBOT soyoil and a firmer Canadian dollar, according to participants.

However, while the futures have traded within a $30 range over the past month, the crush margins have generally held within $5 of the $100 per tonne mark.

At this time a year ago, the margins worked out to about $235 above the futures, as the logistics problems hampered rail movement across the Prairies.

While the current margins are a far cry from those highs, they remain profitable, and domestic processors continue to show solid demand.

Crushers are running ahead of last year’s pace, with 4.25 million tonnes processed in the crop year to date, as of last Tuesday (March 3), according to the latest Canadian Oilseed Processors Association update. That compares with 4.04 million tonnes at the same point the previous year.

— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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